Exxaro Resources Limited. JSE: EXX

Background of Exxaro

Exxaro Resources is one of the largest diversified resources groups in South Africa, with other offices and facilities spread out across Africa, Europe, America, Asia and Australia. The group focuses mainly on large coal and heavy minerals mining, with other interests in the chemicals, ferrous and energy markets. After a history rooted in innovation and expansion, the company began trading in its current guise in 2006.

The group is a constituent of the Socially Responsible Investment index of the Johannesburg Stock Exchange (JSE) and has regularly been a constituent of theJSE Top 40 Index. A large portion of capital expenditure is dedicated to coal mining. Exxaro has six managed coal mines (mainly in the Mpumalanga and Limpopo provinces) including the Grootgeluk mine, which is recognised as one of the world’s most efficient mining operations.

Exxaro also holds significant stakes in titanium ore and titanium dioxide companies and the Sishen Iron Ore Company. The group recently decided to buy into a 50/50 joint venture with Tata Power to build two wind projects in the Eastern Cape.

The group recorded revenue of R 18 billion in 2015 and produced 42 million tonnes of coal. Asset value stands at around R 52.6 billion, with a market cap of R29 billion.

Exxaro Shares Growth Driver

2014 was a difficult year for Exxaro as a result of deteriorating iron ore and other bulk commodity prices, as well as the impairment of the R 5.8 billion Mayoko Iron Ore project in the DRC. The group’s data for the financial year highlighted a R884 million loss, with Exxaro share price falling sharply. As result of cost reduction initiatives and improved trade conditions, the group returned to profitability in 2015, registering a profit of R267 million.

Capital expenditure continues to be dominated by the group’s efforts to buy into coal. One of Exxaro’s largest development projects is the R3.8 billion Belfast mine, which is scheduled to be commissioned by 2017. At full capacity, the mine will deliver around 2.2 million tonnes of steam coal for sale to export customers and 500 000 tonnes of power station coal per annum. An additional R929 million has been earmarked for expansion of the Grootgeluk mine, which is ramping up coal supply to Eskom’s flagship Medupi Power Station.

The group has forecast that trading conditions will remain challenging going forward, in the face of a weak exchange rate, oversupplied thermal coal and iron ore markets and pricing weakness in the mineral sands and titanium sectors.

Exxaro Group Investor Tip

The live online stocks chart shows that Exxaro share price has been on a steady decline since 2012, falling from a high of R214 to a low of R42 at the beginning of 2016. Slightly improved trade conditions led to Exxaro share price recovering to R81 by mid-2016.

With the share trading at well below its net asset value, investment analysts have advised that the stocks will outperform the market, hinting that investors should buy Exxaro shares at their current soft price.

Exxaro Major Shareholders

Sector

Energy

Industry

Oil, Gas & Coal

Sub industry

Coal Operations

How to buy Exxaro Group Shares

Exxaro : How to buy Exxaro Group Shares Online

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